UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6727
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Dominion Funds, Inc.
- --------------------
(Exact name of registrant as specified in charter)
1141 Custis Street, Alexandria, Virginia 22308
- ----------------------------------------------
(Address of principal executive offices)(Zip code)
Paul Dietrich, 1141 Custis Street, Alexandria, Virginia 22308
- -------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 416-2053
--------------
Date of fiscal year end: June 30
-------
Date of reporting period: 07/01/04 - 12/31/04
-------------------
Item 1. Reports to Stockholders.
[LOGO]
SHEPHERD FUNDS
SEMI-ANNUAL REPORT
DECEMBER 31, 2004
SHEPHERD LARGE CAP GROWTH FUND
A SERIES OF DOMINION FUNDS, INC.
- --------------------------------------------------------------------------------
Dear Fund Shareholders,
This document is the Fund's Semi-Annual Report as of December 31, 2004.
The SHEPHERD FUND ended the year 2004 down -1.9%. The SHEPHERD FUND slightly
under-performed the DOW JONES INDUSTRIAL AVERAGE Index that was up only 3.2% for
the year.
However, the FUND has substantially out-performed all the major indexes since
the first of this year 2005.
This chart of the DOW in 2004 below vividly illustrates some of the difficulties
investors faced last year.
[CHART OMITTED]
The SHEPHERD FUND'S investment strategy actively attempts to manage the risks
posed by these stock market volatilities by increasing the cash in the FUND when
the market is going down and by selling stocks within the FUND if they hit their
"STOP-LOSS TARGET PRICES." When the stock market is going down, you never know
whether it is going down just a few percentage points or more than 20%. No one
knows this, so my policy is to cut losses quickly by increasing cash.
Because we never try to time the market, we simply follow the direction it is
already going by watching several indexes, we always get out of the market a
little late and get back in a little late. This sometimes costs a percentage
point or two each time if the stock market movement changes direction quickly,
like last year.
Normally this is not a problem if the market goes up and down once or even twice
in the same year. However, when it goes up and down four times in the same year,
as it did in 2004, the FUND will under-perform the market with our investment
strategy discipline of cautious risk management. Luckily, stock markets like
this only happen every 5 years or so.
In 2003, the SHEPHERD FUND was up +25.2%. Although the stock market started off
slowly in January 2005, it now seems to be stabilizing and we have already made
up the FUND'S very small 2004 losses. I believe the FUND will produce good gains
this year.
Until then....
Patience!
Paul Dietrich
Chief Investment Officer
1613 DUKE STREET, ALEXANDRIA, VIRGINIA 22314 703/683-8575 FAX 703/683-9083
THE SHEPHERD LARGE CAP GROWTH FUND
Statement of Assets and Liabilities
December 31, 2004
(unaudited)
Assets
- ------
Investments in securities, at value
(identified cost $5,207,257) $ 5,493,610
Cash and cash equivalents 1,085,511
Receivables
Securities sold 274,756
Dividends and interest 3,015
------------
TOTAL ASSETS 6,856,892
------------
Liabilities
- -----------
Payables
Capital shares redeemed 3,413
Securities purchased 889,556
Investment advisory fee 9,474
Administration fee 11,642
------------
TOTAL LIABILITIES 914,085
------------
NET ASSETS $ 5,942,807
============
Analysis of Net Assets:
Net capital paid in on shares of capital stock $ 13,415,883
Undistributed investment loss (2,481,339)
Undistributed net realized losses (5,278,092)
Net unrealized appreciation 286,355
------------
$ 5,942,807
============
Capital shares outstanding 1,645,221
Net asset value and offering price per share
Net asset value per share $ 3.61
============
Offering price per share $ 3.79
============
See notes to financial statements.
THE SHEPHERD LARGE CAP GROWTH FUND
Statement of Operations
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
(Unaudited)
Investment loss
- ---------------
Investment income
Dividends $ 16,641
Interest 2,992
---------
Total investment income 19,633
---------
Expenses
Investment advisory fee 26,674
Administration fee 33,641
---------
Total expenses 60,315
---------
Net investment loss (40,682)
---------
Realized loss and unrealized appreciation on investments
- --------------------------------------------------------
Net realized loss on investments in securities (111,715)
Net change in unrealized appreciation
of investments in securities 334,137
---------
Net gain on investments 222,422
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 181,740
=========
See notes to financial statements.
THE SHEPHERD LARGE CAP GROWTH FUND
Schedule of Investments in Securities
December 31, 2004
(unaudited)
COMMON STOCKS
Shares Value
-------- ----------------------
Basic Materials 18.20%
Chemical Manaufacturing 8.09% AIRGAS (a) 4,520 $ 119,825
RPM INTERNATIONAL 12,270 $ 241,228
SYNGENTA AG ADR 5,600 $ 119,560
---------
$ 480,613
Gold & Silver 3.04% NORTHERN DYNASTY (a) 37,500 $ 181,875
Misc. Fabricated Materials 1.97% WATTS INDUSTRIES/A 3,775 $ 121,706
Metal Mining 5.10% CAMECO CORP (a) 2,890 $ 302,882
Capital Goods 16.58%
Misc. Capital Goods 5.93% AMERICAN STANDARD 5,650 $ 233,458
WATSCO INC 3,380 $ 119,044
---------
$ 352,502
Aerospace 3.88% CERADYNE INC (a) 4,385 $ 250,866
Construction 6.77% EAGLE MATERIALS INC 1,275 $ 110,096
TOLL BROTHERS INC 4,255 $ 291,936
---------
$ 402,032
Consumer Cyclical 11.93%
Appliances 7.98% BLACK & DECKER CORP 2,735 $ 241,583
JARDEN CORPORATION 5,350 $ 232,404
---------
$ 473,987
Auto & Truck Manufacturing 3.96% INGERSOLL-RAND 2,935 $ 235,681
Energy-Oil & Gas 1.48% TOTAL CO 1,260 $ 102,501
Financial 7.86%
Investment Services 7.23% EMPIRE FINANCIAL HLD (a) 200,000 $ 198,000
FRANKLIN RESOURCES (a) 3,330 $ 231,935
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$ 429,935
Misc. Financial Services 0.62% WATERSIDE CAPITAL CO (a) 5,300 $ 25,445
Health Care-Health Care 3.79% RENAL CARE GROUP (a) 6,430 $ 231,416
Facilities
Services 9.28%
Communication Services 3.88% AMERICA MOVIL ADR (a) 4,880 $ 255,468
Real Estate 1.92% JONES LANG LASALLE (a) 3,025 $ 113,165
Recreational Activities 1.97% SPEEDWAY MOTORSPORTS (a) 3,090 $ 121,066
Retail 1.51% AMERICAN EAGLE OUT (a) 2,375 $ 111,863
Technology 10.75%
Electronic Instruments & Controls 3.90% AMETEK INC (a) 6,630 $ 236,492
Scientific Instruments 3.84% BECKMAN COULTER INC (a) 3,420 $ 229,106
Semiconductors 1.52% MARVEL TECH GROUP (a) 3,350 $ 118,825
See notes to financial statements.
THE SHEPHERD LARGE CAP GROWTH FUND
Schedule of Investments in Securities
December 31, 2004
(unaudited)
Shares Value
------- ----------------------
Software 1.49% AUTODESK INC. (a) 3,750 $ 142,313
Transportation 5.77%
1.98% GRUPO AEROPORTUARIO (a) 4,185 $ 114,460
Trucking 3.79% LANDSTAR SYSTEM INC 1,600 $ 117,824
YELLOW ROADWAY CORP 1,925 $ 107,242
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$ 225,066
Utilities-Natural Gas 3.90% QUESTAR CORP 4,600 $ 234,345
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TOTAL INVESTMENTS
IN SECURITIES 89.54%
(cost $5,207,257) $5,493,610
==========
Notes: (a) Presently non-income producing.
(b) Percentages are of net assets.
See notes to financial statements.
THE SHEPHERD LARGE CAP GROWTH FUND
Statement of Changes in Net Assets
Six months
ended Year Ended
December 31, June 30,
2004 2004
(Unaudited)
----------- ------------
Change in net assets from operations
- ------------------------------------
Net investment loss $ (40,682) ($ 68,759)
Net realized gain (loss) on investments in securities (111,715) 804,433
Net change in unrealized appreciation on
investments in securities 334,137 (416,302)
----------- -----------
Net increase (decrease) in net assets
resulting from operations 181,740 319,372
Distributions to shareholders from
- ----------------------------------
Net realized gains on investments in securities -- --
Capital share transactions - net 770,810 932,038
- -------------------------------- ----------- -----------
Total increase in net assets 952,549 1,251,410
Net assets
- ----------
Beginning of period 4,990,258 3,738,848
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End of period (including undistributed
investment loss of $2,492,000 and
$2,451,318, respectively) $ 5,942,807 $ 4,990,258
=========== ===========
See notes to financial statements.
THE SHEPHERD LARGE CAP GROWTH FUND
Financial Highlights
Six months
ended
December 31, Year ended June 30,
2004
(unaudited) 2004 2003 2002 2001 2000
------------ --------- --------- --------- --------- ---------
Per Share Data (1):
Net asset value, beginning of year $ 3.52 $ 3.31 $ 3.42 $ 5.59 $ 25.47 $ 19.15
--------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment loss (0.03) (.05) (0.04) (.08) (.24) (.48)
Net realized and unrealized gain
(loss) on investments in securities 0.12 0.26 (0.07) (2.09) (9.93) 12.62
--------- --------- --------- --------- --------- ---------
Total income (loss) from investment
operations 0.09 0.21 (0.11) (2.17) (10.17) 12.14
--------- --------- --------- --------- --------- ---------
Less distributions:
Distributions from net realized gains -- -- -- -- (9.71) (5.82)
--------- --------- --------- --------- --------- ---------
Net asset value, end of year $ 3.61 $ 3.52 $ 3.31 $ 3.42 $ 5.59 $ 25.47
========= ========= ========= ========= ========= =========
Total return 2.62% 6.34% -3.22% -38.82% -53.85% 69.10%
========= ========= ========= ========= ========= =========
Ratios/Supplemental Data:
Net assets, end of year (in
thousands) $ 5,943 $ 4,990 $ 3,739 $ 3,615 $ 6,994 $ 17,903
Ratio of expenses to average
net assets 1.13% 2.25% 2.25% 2.25% 2.25% 2.24%
Ratio of net investment loss to
average net assets -0.76% 1.37% 1.33% 1.94% 2.03% 2.02%
Portfolio turnover rate 167.01% 258.84% 235.79% 99.77% 19.96% 120.65%
(1) Per share information has been calculated using the average number of
shares outstanding.
(2) Sales load is not reflected in total return. Total return is not
annualized.
See notes to financial statements.
THE SHEPHERD LARGE CAP GROWTH FUND
Notes to Financial Statements
Note 1 - Nature of Business and Summary of Significant Accounting Policies
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Nature of Business:
-------------------
The Shepherd Large Cap Growth Fund (Fund) is a separate series of
shares of common stock of Dominion Funds, Inc. (Company). The
Company was incorporated in the state of Texas in June of 1992, and
is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Fund is
subject to various investment restrictions as set forth in the
Statement of Additional Information. The investment objective of the
Fund is capital appreciation. The Company may designate one or more
series of common stock. The only series currently designated is the
Fund. Each capital share in the Fund represents an equal
proportionate interest in the net assets of the Fund with each other
capital share in such series and no interest in any other series.
Significant Accounting Policies:
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of the assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
Valuation of Securities
-----------------------
Securities are valued at the close of each business day. Securities
traded on national securities exchanges or on the national market
systems are valued at the last quoted sales price on the day of
valuation. Securities for which representative market quotations are
not readily available are valued at fair value as determined in good
faith by the Board of Directors.
Security Transactions and Investment Income
-------------------------------------------
Security transactions are accounted for on the date the securities
are purchased or sold. Realized security gains and losses from
security transactions are reported on an identified cost basis.
Dividend income is recognized on the ex-dividend date, and interest
income is recognized on the accrual basis.
THE SHEPHERD LARGE CAP GROWTH FUND
Notes to Financial Statements
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(continued)
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Cash
----
Cash is held in a credit interest account at First Southwest
Company, bearing interest at a variable rate.
Income Taxes
------------
The Fund's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies
and to distribute all of its net taxable income, including any net
realized gains on investments, to its shareholders. Therefore, no
federal income or excise tax provision is required.
Net investment income (loss), net realized gains (losses) and the
cost of investments in securities may differ for financial statement
and income tax purposes. The character of distributions from net
investment income or net realized gains may differ from their
ultimate characterization for income tax purposes. At December 31,
2004, there were no material differences. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized
gains were recorded by the Fund.
Distributions to Shareholders
-----------------------------
Dividends declared and paid from net investment income or net
realized gains are recorded on the ex-dividend date.
Note 2 - Distribution to Shareholders
----------------------------
There were no distributions to shareholders for the six months ended
December 31, 2004.
At December 31, 2004, the Fund had accumulated undistributed net
investment losses of $2,481,339 and accumulated undistributed net
realized losses from investments in securities of $5,278,092.
THE SHEPHERD LARGE CAP GROWTH FUND
Notes to Financial Statements
Note 3 - Capital Share Transactions
--------------------------
As of December 31, 2004, there were 1,000,000,000 shares of $.001
par value capital stock authorized of which 200,000,000 shares are
classified as the Fund's series; the balance is unclassified. As of
December 31, 2004, capital paid-in aggregated $13,415,883.
Transactions in shares of capital stock for the six months ended
December 31, 2004 are as follows:
Shares Amount
---------- ----------
Shares sold 418,140 $1,416,637
Shares issued in reinvestment
of dividends -- --
---------- ----------
Shares redeemed 191,734 645,827
---------- ----------
Net increase 226,406 $ 770,810
========== ==========
Note 4 - Securities Transactions
-----------------------
Purchases and sales of securities (excluding short-term obligations)
aggregated $12,227,367 and $9,603,854, respectively, for the six
months ended December 31, 2004. As of December 31, 2004, the net
unrealized appreciation of securities was $286,355.
THE SHEPHERD LARGE CAP GROWTH FUND
Notes to Financial Statements
Note 5 - Investment Advisory Fees and Transactions with Affiliates
---------------------------------------------------------
The Fund has an Investment Advisory Agreement with Foxhall Capital
Management, Inc. (Advisor) (formerly Nye, Parnell & Emerson Capital
Management) to act as its investment advisor. The Advisor also
serves as investment advisor to certain private accounts. The
Advisor has no previous experience in advising a mutual fund, other
than to advise the Fund since November 1, 1999. The Advisor provides
the Fund with investment advice and recommendations, and supervises
the purchase and sale of securities on behalf of the Fund, including
the negotiation of commissions and the allocation of principal
business and portfolio brokerage. For such services, the Advisor
receives an annual investment advisory fee equal to 1.0% of the
Fund's average daily net assets, computed daily and paid on a
monthly basis.
The Fund has an Administration Agreement with Foundation Management,
Inc. (Administrator). Pursuant to the Administration Agreement, the
Administrator is responsible for the administration and overall
management of the Fund. The Administrator pays all operating costs
of the Fund, except the investment advisory fee and the
administration fee, interest, taxes, the cost of brokerage incurred
in connection with execution of securities transactions, litigation
expenses and indemnification paid to advisors of the Fund and
officers and directors of the Company. For such services, the
Administrator receives an annual administration fee equal to 1.25%
of the Fund's average daily net assets, computed daily and paid on a
monthly basis.
Certain directors and officers of the Company are also directors and
officers of the Advisor and of the Administrator.
[LOGO]
SHEPHERD FUNDS
ADDITIONAL INFORMATION
Information about Directors
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. Information pertaining to the directors of the Fund
is set forth below. The SAI includes additional information about the Fund's
directors and is available, without charge, upon request by calling (800) 416
2053.
Interested Directors
- --------------------
Term of Other
Position Office and Directorships
Name, Held with Length of Principal Occupation(s) Held by
Address and Age Fund Time Served During Past 5 Years Director
- ------------------------------------------------------------------------------------------------------------------------------------
Paul Dietrich Chairman, Indefinite term; President and Managing Director of Eton Court None
1613 Duke Street President, Director since Asset Management, Ltd. ("Eton Court") (parent of
Alexandria, VA 22314 Director 2001; Chairman Foxhall Capital Management, Inc., the Fund's
Age: 55 since 2002; investment advisor) and President of Foundation
President since Management, Inc., the Fund's administrator (1999
2003 - present);
Non-Interested Directors
- ------------------------
Term of Other
Position Office and Directorships
Name, Held with Length of Principal Occupation(s) Held by
Address and Age Fund Time Served During Past 5 Years Director
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas W. Powell Director Indefinite term; Registered representative of New Investor World None
4101 McEwen Director since Incorporated (2000 - present); COO/CFO NIW
Suite 110 1999 Holdings, Inc. (2002 - Present); CEO Rushmore
Dallas, TX 75244 Investment Management Corp. (2001 - 2002);
Age: 64 Chairman and Chief Executive Officer of
Northstar Financial Group (1995 - 2001).
[LOGO]
SHEPHERD FUNDS
SEMI-ANNUAL REPORT
DECEMBER 31, 2004
Investment Advisor Transfer Agent Distributor
------------------ -------------- -----------
Foxhall Capital Management, Inc. Fund Services, Inc. Cullum & Burks
1613 Duke Street 8730 Stony Point Pkwy Securities, Inc.
Alexandria, VA 22314 Suite 205 13355 Noel Road,
(800) 416 2053 Richmond, VA 23235 Suite 1300,
(800) 628 4077 One Galleria Tower
Dallas, TX 75240
(972) 755 0270
Administrator Independent Auditors Legal Counsel
------------- -------------------- -------------
Foundation Management, Inc. Brad A. Kinder, CPA Frederick C.
35955 Huntland Farm Road 400 Parker Square Summers, III, P.C.
Middleburg, VA 20117 Suite 250-K Attorney at Law
(800) 416 2053 Flower Mound, TX 75028 8235 Douglas Ave.,
Suite 1111
Dallas, TX 75225
Officers Directors Custodian
-------- --------- ---------
Paul Dietrich Paul Dietrich First Southwest Company
Chairman, President 1700 Pacific, Suite 500
Douglas W. Powell Dallas, TX 75201
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
The schedule is included as part of the report to shareholders filed under Item
1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
Based on their evaluation of registrant's disclosure controls and procedures (as
defined in rule 30a-2(c) under the Investment Company Act of 1940 as of March
10, 2005, registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to be
appropriately designed to ensure that information required to be disclosed by
registrant in the reports that it files under the Securities Exchange Act of
1934 (a) is accumulated and communicated to registrant's management, including
its principal executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms adopted by the U.S. Securities and Exchange Commission.
There has been no change in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are
attached hereto as EX-99.CERT. Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 are attached hereto as EX-906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dominion Funds, Inc.
By: /S/ Paul Dietrich
-----------------
Paul Dietrich, President
Date: March 10, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /S/ Paul Dietrich
-----------------
Paul Dietrich, Principal executive and principal financial officer
Date: March 10, 2005